The Business of Baseball

by thegodfather on Oct 9, 2008 10:49 PM EDT

When I first began researching for this fanpost, I intended to present an argument for which team would go down as the best team of the decade (2000-2009). I figured it had to be between the Red Sox and the Cardinals, but that it would all come down to 2009. I soon realized that it is actually the Yankees who have by far the most wins over the past 9 seasons. I know that wins wouldn’t have been the sole determinant, but that fact alone got me thinking. My focus, or lack thereof, had been shifted drastically.

I began by creating a spreadsheet of all 30 teams’ W-L totals for the past 9 years. I also found the winning percentages. In order, the top 5 winningest teams over the past 9 years are the Yankees, Red Sox, Cardinals, Athletics, and Braves. It was nice to see that the Cards had indeed been the model for the NL. I also threw in the number of total playoff appearances (PO), league titles (LCS), and World Series titles (WS). At this point in my research, I still didn’t know what I was looking for.

	Wins	Losses	PCT	PO	LCS	WS
NYY	862	592	0.593	8	3	1
BOS	825	632	0.566	5	2??	2??
STL	822	635	0.564	6	2	1
OAK	815	641	0.56	5	0	0
ATL	806	650	0.554	6	0	0
LAA	803	655	0.551	5	1	1
CHW	778	681	0.533	3	1	1
MIN	776	682	0.532	4	0	0
SFO	767	688	0.527	3	1	0
LAD	767	691	0.526	3	0??	0??
PHI	757	700	0.52	2	0??	0??
HOU	758	699	0.52	3	1	0
SEA	752	706	0.516	2	0	0
CLE	751	707	0.515	2	0	0
NYM	745	711	0.512	2	1	0
ARI	735	723	0.504	3	1	1
TOR	730	727	0.501	0	0	0
FLA	724	732	0.497	1	1	1
CHC	724	733	0.497	3	0	0
SD	694	765	0.476	2	0	0
TEX	689	769	0.473	0	0	0
COL	677	782	0.464	1	1	0
CIN	673	785	0.462	0	0	0
MIL	661	796	0.454	1	0	0
WAS	652	805	0.447	0	0	0
DET	643	814	0.441	1	1	0
BAL	634	822	0.435	0	0	0
PIT	619	837	0.425	0	0	0
TB	610	845	0.419	1	0??	0??
KC	607	851	0.416	0	0	0

At this moment I was full of animosity toward Boston and New York (weird, right?). I thought that it was ridiculous how they won all the time but, as we all know, they just spend a ton of money to do it. This is when, finally, I decided to attempt to rank all of the teams by how effectively they use their payroll. Meaning, who gets the most wins but doesn’t spend more than they should have to in order to get them?

I added up each team’s payroll for the past 9 years and added it to the chart. As expected, the Yankees and Red Sox ranked 1-2 in average annual payroll. I didn’t know exactly how to reduce the broad concept of “effectiveness of payroll management” to a single number, or, better yet, how to find that number. First I tried just total payroll over 9 years divided by total wins ($M/Win). This method didn’t work, because while it gave over-spenders like NY poor ratings, it gave terrible teams like KC good ratings simply because they don’t spend much.

I tried probably 5 more methods total, and I will spare you the explanations, before I settled on $M/Win>60. Everyone in baseball has heard something to this effect: “Every team wins 60 and loses 60; it’s the other 42 that count.” I took that literally. I took the 9-year payroll divided by total wins minus (9*60). Basically, I decided that the first 60 wins of every season for every team are “free” since all teams win 60 games (Please don’t cite examples to the contrary, I know already. Over time, teams will all average at least 60 wins.). This formula worked. Here are the results, sorted by my fancy new stat:

	AVG W	AVG Payroll ($M)	$M/Win	$M/Win>60
OAK	90.6	51	0.56	1.7
FLA	80.4	35	0.44	1.7
MIN	86.2	49	0.57	1.9
STL	91.3	84	0.92	2.7
CLE	83.4	63	0.75	2.7
CHW	86.4	75	0.87	2.8
LAA	89.2	86	0.96	2.9
ATL	89.6	92	1	3.1
SFO	85.2	79	0.93	3.1
HOU	84.2	74	0.88	3.1
PHI	84.1	76	0.9	3.2
TOR	81.1	67	0.83	3.2
SD	77.1	56	0.73	3.3
ARI	81.7	73	0.89	3.4
WAS	72.4	45	0.62	3.6
BOS	91.6	116	1.3	3.7
SEA	83.6	87	1	3.7
MIL	73.4	50	0.68	3.7
COL	75.2	59	0.78	3.9
CIN	74.8	57	0.76	3.9
LAD	85.2	100	1.2	4
CHC	80.4	86	1.1	4.2
NYY	95.8	163	1.7	4.6
NYM	82.8	104	1.3	4.6
TEX	76.6	76	1	4.6
PIT	68.8	43	0.63	4.9
TB	67.8	38	0.56	4.9
KC	67.4	44	0.65	5.9
DET	71.4	72	1	6.3
BAL	70.4	72	1	6.9

What this shows is a very arbitrary ranking of teams by the effectiveness at which they “bought” wins (Low number is good). As I expected, Oakland and Minnesota are ranked very high because they spend little money but still manage to win. I was surprised that Florida was ranked so high, but after all, they do win a lot of games for their very low payroll. Using this value and my own insight, here’s my 1-5 for the top organizations when it comes to maximizing value while still winning games:

1) Oakland – Easy pick here. 5 playoff appearances averaging a 91 win season every year for a measly $51 million a year. The Athletics organization has done an outstanding job at putting together a winning team while still being profitable.

2) Minnesota – 4 playoff appearances and an 86 win average for $49 million a year. I’ll buy it.

3) St. Louis – OK, I’m biased. So what? 6 playoff appearances, 2 league titles, and a World Series championship while averaging 91 wins a season is pretty darn good for $84 million a year. Especially when the Cardinals have been (arguably) the best team in the NL over the last 9 years.

4) LA Angels – Another winning franchise that doesn’t pay a ton to do it. 5 playoff appearances and a championship, averaging 89 wins a season for $86 million a year.

5) Florida – Hard pick here. I didn’t like giving a losing team so much credit, but seriously, $35 million a year and they still average 80 wins?!?! They don’t have any fans, so they aren’t making money, so the fact that they can field an 80 win team consistently is amazing. Did I mention the WS title?

So, next time the Cardinals don’t try to sign that big free agent, or make that blockbuster trade, just remember how smart the front office has been. Baseball is a business; owners are in it to make money. The fact that the Cardinals have been able to be profitable while fielding some really outstanding teams this decade is really amazing, and the organization’s leaders deserve some credit.

That’s all I got. I didn’t exactly know what to do with all of this information, but I think it’s interesting. Hope you thought so too.

8 recs | Comment 35 comments

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Excellent

Excellent work, pat on the back for you sir :)

J.C. Bradbury did a similar study in his book Sabernomics (excellent read by the way) and the results are actually pretty similar. He did his using the sum of a calculated player salary value and a performance salary value. The Marlins, Cardinals, and Athletics were in the top 5 of both yours and his (Twins were 10th), but his was just a 3 year sample, it’s really interesting to see a 10 year sample of a cost per win study. Those top three teams are so amazingly efficient it’s scary, and the great thing is that organizationally they are each unique in their approaches from the rest of the league. Looking at this, it really makes me feel like I took the Cardinals run in the early 00’s for granted…here’s to another ten years of success!

by Bullet Bob Gibson on Oct 9, 2008 11:23 PM EDT 0 recs

Forgot to mention

Stats from Baseball Reference
Payroll info from USA Today

Is it fraud when Cubs ownership says "this year is our year?" Can somebody sue for that?

by thegodfather on Oct 9, 2008 11:29 PM EDT 0 recs

errr...

the name of Bradbury’s book is The Baseball Economist, sabernomics is his website

by Bullet Bob Gibson on Oct 9, 2008 11:29 PM EDT 0 recs

ummmm

+1000

awesome stuff. i don’t really have anything to add. great read.

although, i do have to say, cin should probably be ranked ahead of col, considering the ball park factor, and…

just kidding.

by adiueordie on Oct 10, 2008 3:38 AM EDT 0 recs

Just to be curious

I always heard that instead of the 1st 60 wins and 60 losses were free, that it was “you win 1/3, you lose 1/3, and your record is really based on the other 1/3 of the games.” What do the numbers look like if you change it to 54, 54, and 54? Is there a big difference?

by stlfan on Oct 10, 2008 7:49 AM EDT 0 recs

It's very time consuming...

But I just ran a few numbers again, and by using 54 “free” wins instead of 60, Florida gets ranked ahead of Oakland, KC ahead of the Yankees and not far behind Boston. I ony ran a few teams, but I’m pretty sure this system would weigh the payroll much heavier than winning. Not good, obviously. I did try something like this when I was still experimenting earlier though.

Is it fraud when Cubs ownership says "this year is our year?" Can somebody sue for that?

by thegodfather on Oct 10, 2008 2:39 PM EDT up 0 recs

Fair enough.

Thanks!

by stlfan on Oct 10, 2008 3:02 PM EDT up 0 recs

awesome post

It’s funny that the top ten are clubs I’ve associated with the perception of “here lies good baseball.” Except for San Francisco. I’m surprised Arizona is so low.

Somewhat OT, an anecdote of what might be coming up for the Cubs. Will they drop below the Yankees on your adjusted chart? Hmm.

"But listen, and understand: more Molinas are out there. They can't be bargained with. They can't be reasoned with. They don't feel pity, or remorse, or fear." - THT

by Yadi2Second on Oct 10, 2008 9:26 AM EDT 0 recs

Great stuff

Sometime during the long 2007 season (as the Cardinals hovered at or below .500) I tried to lift my spirits by putting together a table of NL wins for the decade. I’ve updated it a few times. It looks pretty clear that we’ll edge Atlanta for the decade. (It wasn’t obvious at the start of 2008).

This led me to think about a variety of ways to capture why this has been a great decade for Cardinals fans. You’ve definitely hit on some of the big ones: One is the sheer number of wins. A second is making it to the LCS and WS (with a win, of course). A third is watching the greatest player of the era day and day out.

Here are a few other possible yardsticks that it would be interesting to check:

1) Total playoff game victories. IOne could simply use total playoff games, but I like this better because sweeps (see Cubs 07 or 08; Cards WS 04) count as 0. It takes into account both opportunity and success at the same time. I complied this at one point and the Cardinals were pretty far ahead in the NL for the decade. The measure is redundant to some extent with what you’ve done (PO, LCS, etc.), but it captures a bit more of the excitement—it is a way to quantify the fact that winning the LDS is satisfying, or coming close in the LCS counts).

2) Being in the playoff hunt—these are hard to collect, but interesting:
a) Number of days in the decade spent in first place in the division (or % of days)
b) Number of days within 3 gb (or better) of a playoff spot (division or WC) (or %)
c) Average gb, averaged over all days in the decade

All of these measures reveal more than number of wins, because they capture the competitive dimension. Using these measures, the 2003, 2006, 2007, and 2008 teams fare well even though the teams did not win a lot of games.

by ncgostl on Oct 10, 2008 10:41 AM EDT 0 recs

Are you trying to set up a

Cardinal Fanbase Happiness Index (CFHI). If so, perhaps we should post a meter on the front page of the site to measure it each and every day…. :)

"I just wish that the late Harry Caray were still around so I could hear him mispronounce 'Kosuke Fukudome' every fukun' night" -- Dennis Miller

by fourstick on Oct 13, 2008 1:36 PM EDT up 0 recs

I like it-- let's call it a "Cardinal sentiment index"

Cardinals fans have been blessed with a lot of “contending” time in the 2000s. To me, it would be interesting to quantify the amount of contending time we’ve had to enjoy. Unfortunately (fortunately?), contention is something I live and die with all season long (however sad that sounds!).

See Pirates, Pittsburgh, for how lack of contending might dampen interest…..

ps. posts at VEB when contending vs. not contending would be an interesting measure of this effect…….

by ncgostl on Oct 13, 2008 2:39 PM EDT up 0 recs

You're just going to confuse everyone with CSI though :-)

"I just wish that the late Harry Caray were still around so I could hear him mispronounce 'Kosuke Fukudome' every fukun' night" -- Dennis Miller

by fourstick on Oct 13, 2008 4:05 PM EDT up 0 recs

Says alot.....

That the Cardinals, even with a couple of poor seasons, are still, by far in alot of ways, the best NL team over that time frame.

We all like to *itch and moan about the players, the management, and the coaches, but we’re pretty darn lucky to have what we have.

by SoonerfanTU on Oct 10, 2008 10:44 AM EDT 0 recs

Just a couple of quibbles

I understand what the purpose is of this study, but I disagree with your terminology slightly. It looks like your basing a lot of your definition of “success” on being both successful in regular season wins and being “profitable”. Well, correct me if I’m wrong, but I believe all teams in Major League Baseball are profitable. There isn’t one franchise losing money or even coming close to losing money, so I think the better way to say what your looking for is “which team is the most efficient”?

But, ultimately I have an issue with any study that finds Oakland to be the best baseball franchise and has Florida in the top 5 while teams like the Yankees and the Red Sox aren’t even in the top 5. Bottom line, those teams (although the Yankees are quickly fading in these regards) win games and they win post season games. And in the Red Sox case, they win championships.

But, like I said, I realized what you’re not looking for actual “success” that will put hardware in the trophy case or asses in the seats. You’re looking a what teams win the most regular season games while being the most frugal. So, I guess in this regards, nice job. You did a lot of work and it definitely shows.

Nothin'. A handful of nothin'. You stupid mullet head. He beat you with nothin'. Just like today when he kept comin' back at me......with nothin'.

Yeah, well, sometimes nothin' can be a real cool hand.

by Tackle Box on Oct 10, 2008 10:55 AM EDT 0 recs

you might be wrong

http://espn.go.com/mlb/s/2000/0719/641139.html

by eglasier on Oct 10, 2008 1:33 PM EDT up 0 recs

In terms of profit,

those figures are a little outdated. I remember last off-season the discussion in the media (was it during Winter Meetings?) of baseball’s economic boom. MLB had $6 billion in revenue.

According to Forbes.com, only three teams were in the red after 2007 season, the Blue Jays, the Red Sox, and the Yankees. Every other team profited. (Here’s the accompanying article.)

by spants on Oct 10, 2008 2:44 PM EDT up 0 recs

Oh

and the losses are misleading because they don’t account for media revenue. So in reality, those teams likely made money, too.

by spants on Oct 10, 2008 2:46 PM EDT up 0 recs

Yeah, it obviously depends on what your basing "profit" on

When you take into account teams like the Yankees and their tv deal (and the fact they own the Yes Network), they’re swimming in profit. Then you’ve got the aforementioned boom of mlb.com and mlb.tv that gets distributed to all teams, plus the luxury tax that gets spread around the league, then no one is losing money.

Nothin'. A handful of nothin'. You stupid mullet head. He beat you with nothin'. Just like today when he kept comin' back at me......with nothin'.

Yeah, well, sometimes nothin' can be a real cool hand.

by Tackle Box on Oct 10, 2008 3:20 PM EDT up 0 recs

This has to be disclosed does it not?

Being that these teams are part of an anti-trust exemption, shouldn’t their financial performance be public information? I’m not sure how that works, but if I was Hank Steinbrenner or John Henry and I’ve been paying luxury tax to the other teams I’d sure like to know whether that money is being spent on the team (via payroll, fan appreciation, etc.) or whether it’s lining the pockets of some of the owners who are scrimp on payroll all the time (such as the owners in KC, both Florida teams, Oakland, etc.)

Obviously that’s a two edged sword, since those teams could drive up the cost of free agents for their ballclubs as well, but I know that George Steinbrenner made a comment similar to that one earlier this decade (Before his team got pasted by a Marlins team with a $40 million payroll).

Overall, I think the luxury tax has worked better than I ever thought it would.

"I just wish that the late Harry Caray were still around so I could hear him mispronounce 'Kosuke Fukudome' every fukun' night" -- Dennis Miller

by fourstick on Oct 13, 2008 1:44 PM EDT up 0 recs

Yeah, I believe that's what people would like to see

If there’s going to be a maximum a team should spend, there should also be a minimum.

Nothin'. A handful of nothin'. You stupid mullet head. He beat you with nothin'. Just like today when he kept comin' back at me......with nothin'.

Yeah, well, sometimes nothin' can be a real cool hand.

by Tackle Box on Oct 13, 2008 2:16 PM EDT up 0 recs

I wouldn't even say that...

I would just say that any and all revenue sharing money must be invested in baseball purposes. You can’t possibly run a club on just revenue sharing money, so there would have to be some money invested otherwise. My concern is more that owners are pocketing that money directly…

"I just wish that the late Harry Caray were still around so I could hear him mispronounce 'Kosuke Fukudome' every fukun' night" -- Dennis Miller

by fourstick on Oct 13, 2008 4:07 PM EDT up 0 recs

Forbes

the forbes “Operating Income” column is Earnings before interest, taxes, depreciation and amortization.

What is not clear – is it earnings before revenue sharing, luxury tax, DirecTV shared revenue, MLBtv shared revenue, etc…

by Knighttime on Oct 10, 2008 9:58 PM EDT up 0 recs

So

the true profits stand to fluctuate a bit, if not a lot. My guess is that no team is finishing in the red.

by spants on Oct 11, 2008 1:04 AM EDT up 0 recs

Very good post!

Hopefully at the end of next year you will be able to determine which team really is the most successful franchise of the decade…(crossing my fingers for the Cardinals!!!)

Ryan Howard: one of the most Statistically Outstanding players of all time

by RunninRedbird on Oct 10, 2008 11:21 AM EDT 0 recs

I wonder what would happen

if you only looked at teams in any given year who made the playoffs? After all, the illusion is that we root for teams we hope to actually see play in October.

Those Pilgrims ain't lookin' so proud now...

by giveml on Oct 10, 2008 2:17 PM EDT 0 recs

That's not exactly a fair comparison

Because every year there are teams that win a ton of games in a good division that would make the playoffs if they played in a cruddier division. The Cardinals, Astros, White Sox, and Blue Jays would have been in the race until the final day in the NL West this year, but the Dodgers ended up winning it with a record that wouldn’t have gotten them into the playoffs in any other division in baseball. I think that regular season wins has it’s faults as well, but not nearly as many as just looking at playoff performance.

"I just wish that the late Harry Caray were still around so I could hear him mispronounce 'Kosuke Fukudome' every fukun' night" -- Dennis Miller

by fourstick on Oct 13, 2008 1:47 PM EDT up 0 recs

True enough

I just don’t personally care about any measure of baseball efficiency that doesn’t get me to the playoffs, so I was curious how the playoff teams would rank from a business perspective.

Those Pilgrims ain't lookin' so proud now...

by giveml on Oct 13, 2008 7:46 PM EDT up 0 recs

I would think

that Oakland, Minnesota, and St. Louis are going to rank right near the top there as well, simply because they’ve been there quite a bit this decade and their payroll is about 1/3 of what the Yankees and Red Sox are.

That said, it does give us some perspective on how well run an organization the Cardinals have been over the last decade. It really helps to be able to fleece 2 teams for All-Star players without giving up much (Rolen, Edmonds) and to have the best right handed hitter in the last 25 years come out of your own farm system.

"I just wish that the late Harry Caray were still around so I could hear him mispronounce 'Kosuke Fukudome' every fukun' night" -- Dennis Miller

by fourstick on Oct 14, 2008 9:37 AM EDT up 0 recs

Very good post, godfather

FYI, I know you said not to quibble w/ this but replacement-level wins for a team is far lower than 60. It’s around 42, or maybe 47, if I remember correctly. I’ll try looking it up. In any case, is it fair that the Yankees and Red Sox finish toward the bottom of studies like these solely b/c of having high incomes? I don’t think so. After all, they’ve been the best 2 teams of the previous 9 years. Just as there’s a replacement-level # of wins, shouldn’t there also be a maximum # of wins a team should be expected to get. In other words, the Yankees and Sox are basically punished for not winning more games b/c of their payroll yet they’ve won more than 90 games per season. Would it have been possible for them to have won 140? Certainly not. What’s the maximum? I don’t know but there ought to be some credit given for coming as close as possible to the maximum.

Maybe there’s a range of possible wins — from 42 (or whatever) to 120 or something like that and so we should measure $ per possible win or something like that. Obviously I’m just going off-the-cuff right now but there should be some sort of acknowledgement that no one’s going to win 140 games, or 180 or whatever.

by chuckb on Oct 12, 2008 8:19 PM EDT 0 recs

Thanks, and I agree

I just didn’t know how to make the rest of the list work if I only gave teams that few “free” wins. I tried to compensate for what the cost of those first 60 wins would be but it ended up skewing everything else significantly. Oh well, my calculations were 100% unscientific anyway…

The reason I decided to stick with 60 wins is that any self respecting organization should be able to win 60 even off of a very small payroll. What I’m getting at is that the BoSox and Yankees have both been highly successful, but they shouldn’t have had to pay as much as they did for that success (esp. the Yankees, obviously). I tried making a graph of payroll v wins but it didn’t work so well. I’ll probably try again later over the winter. The limit of that graph as payroll (x) approached, say, $500M would be the maximum number of possible wins. After a certain payroll value, you’re going to get very little out of more investment. I wonder if anyone has looked at that before.

Anyway, I know what you’re saying, I’m not trying to be argumentative. Glad you liked the post.

Is it fraud when Cubs ownership says "this year is our year?" Can somebody sue for that?

by thegodfather on Oct 12, 2008 8:37 PM EDT up 0 recs

I'm just glad

you didn’t think I was trying to argumentative. It was really good work.

by chuckb on Oct 12, 2008 8:55 PM EDT up 0 recs

many ways to set the threshold

all give a slightly different insight. in the end bb is simply a competition among very few teams (i.e., divisions) for playoff spots. spending in the nl central and al east can’t really be compared on a per win basis. winning to a playoff level in the al east is simply more expensive. looking at the data in forbes, there is also some data regarding whether teams are paying off their stadiums or not. cubs are not, cards are. substantial difference (i did a fan post on this several months ago). in addition cards are in transition and diverting more gross revenues to the farm system (more teams) and paying bonuses to drafted and undrafted free agents. what i find most interesting is that even on an overall $/win basis, what we all know about teams like the twins is true, ie, that they manage to compete with a relatively low payroll. what they haven’t managed is to win the big one, which is when they go up against higher payroll teams in the al in particular. overall, smart is good, rich and smart is better (see sox, red). mo has his work cut out for him!

"No matter where you go, there you are" Buckeroo Bonzai Across the 8th Dimension

by sportsman on Oct 13, 2008 9:23 PM EDT 0 recs

I'm not sure that you can't compare spending

between divisions. I mean, the Rays won the East this year. Also, teams play teams from other divisions. I think the only way you wouldn’t be able to compare them is $ per playoff appearances. Division shouldn’t correlate with $/win on a long term basis.

Is it fraud when Cubs ownership says "this year is our year?" Can somebody sue for that?

by thegodfather on Oct 14, 2008 7:18 PM EDT up 0 recs